QUESTION 1 On May 19, 2020, Marchand, Inc. sells its hockey pucks to a Mexican hockey team and expects to receive 10 million Mexican pesos one year later. The company does not want to incur any foreign exchange risk, so it decides to hedge through the money market. The one-year risk-free rate in Mexico is 10%; the one-year risk free rate in the US is 5%. The spot exchange rate on May 19, 2020 is 20 pesos=1 dollar (or MXN20=USD1). To initiate the hedging process, the company borrows_ 2020). Note: figures may be approximations. O a. MXN11%; USDS50,000 Ob. MXN10%; USD500,000 O C. MXN10.1m; USD555,000 O d. MXN9.1m; USD455,000 O e. USD500,000; MXN10m _on May 19, 2020. It then uses that amount to buy on the same day (May 19, QUESTION 2 Question 1 . On May 19, 2020, Marchand, Inc. sells its hockey pucks to a Mexican hockey team and expects to receive 10 million Mexican pesos one year later. The company does not want to incur any foreign exchange risk, so it decides to hedge through the money market. The one-year risk-free rate in Mexico is 10%; the one-year risk free rate in the US is 5%. The spot exchange rate on May 19, 2020 is 20 pesos=1 dollar (or MXN20=USD1). Using the information from Question 1 above, Marchand will receive back (approximately) one year later and pay _ (approximately) one year later. O a. USD428,000 and MXN11m; MXN11m O b.USD527,000 and MXN10m; MXN10 O c. USD477,000 and MXN10m; MXN10m O d. USD507,000 and MXN10m; MXN10m O e. USD607,000 AND MXN11m; MXN11m
QUESTION 1 On May 19, 2020, Marchand, Inc. sells its hockey pucks to a Mexican hockey team and expects to receive 10 million Mexican pesos one year later. The company does not want to incur any foreign exchange risk, so it decides to hedge through the money market. The one-year risk-free rate in Mexico is 10%; the one-year risk free rate in the US is 5%. The spot exchange rate on May 19, 2020 is 20 pesos=1 dollar (or MXN20=USD1). To initiate the hedging process, the company borrows_ 2020). Note: figures may be approximations. O a. MXN11%; USDS50,000 Ob. MXN10%; USD500,000 O C. MXN10.1m; USD555,000 O d. MXN9.1m; USD455,000 O e. USD500,000; MXN10m _on May 19, 2020. It then uses that amount to buy on the same day (May 19, QUESTION 2 Question 1 . On May 19, 2020, Marchand, Inc. sells its hockey pucks to a Mexican hockey team and expects to receive 10 million Mexican pesos one year later. The company does not want to incur any foreign exchange risk, so it decides to hedge through the money market. The one-year risk-free rate in Mexico is 10%; the one-year risk free rate in the US is 5%. The spot exchange rate on May 19, 2020 is 20 pesos=1 dollar (or MXN20=USD1). Using the information from Question 1 above, Marchand will receive back (approximately) one year later and pay _ (approximately) one year later. O a. USD428,000 and MXN11m; MXN11m O b.USD527,000 and MXN10m; MXN10 O c. USD477,000 and MXN10m; MXN10m O d. USD507,000 and MXN10m; MXN10m O e. USD607,000 AND MXN11m; MXN11m
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION 1
On May 19, 2020, Marchand, Inc. sells its hockey pucks to a Mexican hockey team and expects to receive 10 million
Mexican pesos one year later. The company does not want to incur any foreign exchange risk, so it decides to hedge
through the money market. The one-year risk-free rate in Mexico is 10%; the one-year risk free rate in the US is 5%.
The spot exchange rate on May 19, 2020 is 20 pesos=1 dollar (or MXN20=USD1). To initiate the hedging process,
the company borrows.
2020). Note: figures may be approximations.
_on May 19, 2020. It then uses that amount to buy
on the same day (May 19,
O a. MXN11%; USD550,000
Ob. MXN10%; USDS00,000
O c. MXN10.1m; USD555,000
d. MXN9.1m; USD455,000
O e. USD500,000; MXN10m
QUESTION 2
Question 1. On May 19, 2020, Marchand, Inc. sells its hockey pucks to a Mexican hockey team and expects to receive
10 million Mexican pesos one year later. The company does not want to incur any foreign exchange risk, so it
decides to hedge through the money market. The one-year risk-free rate in Mexico is 10%; the one-year risk free
rate in the US is 5%. The spot exchange rate on May 19, 2020 is 20 pesos=1 dollar (or MXN20=USD1).
Using the information from Question 1 above, Marchand will receive
(approximately) one year later and pay
back
(approximately) one year later.
O a. USD428,000 and MXN11%; MXN11m
O b.USD527,000 and MXN10m; MXN10M
O c. USD477,000 and MXN10m; MXN10m
O d. USD507,000 and MXN10m; MXN10M
O e. USD607,000 AND MXN11%; MXN11M
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